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Bitcoin showed IBM’s Jerry Cuomo what blockchain could do, but anonymous ledgers didn’t meet the needs of the company’s largest enterprise customers, especially those which are heavily regulated.

Now the vice president of blockchain technologies for IBM, Cuomo had been working in the company’s middleware products. Blockchain brought together some familiar technologies — distributed ledgers, encryption and data synchronization, he said during an interview at Money2020.

“I saw value in supply chains, health care, health record maintenance and in financial services, security and settlement.” Except for supply chains, all those uses operate under regulations that govern data accountability and consistency, he added.

The direction IBM and many other in finance are going is to look at permissioned ledgers connecting companies that know and (within limits) trust each other. The blockchain could allow companies to transact, resolve disputes and settle more efficiently than current practices.

IBM’s corporate treasury and another company which uses IBM Global Finance, the company’s arm that finance purchases of IBM products, suggested using blockchain to resolve disputes, which were delaying $100 million in payments for up to 40 days.

IBM ran two years of transactions to test the concept. By using a distributed ledger which shows the entire life of a transaction from purchase order through remittance, they could reduce the backlog to less than 10 days, freeing up significant capital. IBM has launched a a proof of concept distributed ledger with half a dozen members of IBM Global Finance.

In addition to reducing resolution time, it had also markedly improved customer satisfaction.

In a three-party transaction — IBM, the buyer and the shipping company — the blockchain allows participants to go back to the last point at which they were all in agreement, and then figure out what went wrong. It could be as simple as seeing that a part shipped but never arrived because the address was wrong. Using blockchain simplifies a process that previously involved multiple phone calls, emails and even the occasional fax.

IBM is also working with SBI Securities in Tokyo to test blockchain technology for a new type of bond trading system, from registering the bond until its reimbursement, IBM said in a release.

Cuomo said customer interest in blockchain has developed rapidly this year. It started with blockchain tourism — customers coming in to look around and attend a lecture or two. By mid-year they were getting more prescriptive. Some companies are already using blockchain technology, he said. Walmart is using it in China to track the provenance of food, so if there is a case of mango poisoning stores can see exactly which farm or processing plant was responsible rather than shutting down all mango sales. Everledger, which traces diamonds to digitally certify that they comply with the Kimberly Process, uses IBM’s cloud-based blockchain solution.

Using blockchain effectively in banking may require sociological changes, said Cuomo, such as banks agreeing to cooperate with competitors to fend off potential disruption from companies such as Apple and Google. Using blockchain to power applications such as P2P payments may keep them ahead of disrupters.

“Reducing friction eliminates the middleman, and in a lot of cases that is a bank,” he said.

I like the pace of technology, especially in finance where it can move so fast. I'm on Jay Palter's list of fintech influencers to follow in 2018, although it takes a bit

…

I like the pace of technology, especially in finance where it can move so fast. I'm on Jay Palter's list of fintech influencers to follow in 2018, although it takes a bit of scrolling: http://jaypalter.ca/2018/01/2018-fintech-influencers. In addition to Forbes I write for the Global Association of Risk Professionals (GARP), Chicago City Life and Banking Technology and Mondo Visione, in London.